Sunday, September 15, 2013

Economic hubris in retrospect – Robert Lucas explains (in 2003) that the problem of avoiding depressions "has been solved"

I suppose this post might have been headed, more specifically, "Anti-Keynesian economic hubris in retrospect" or "How the discredited pre-Keynesian dogmas of economic liberalism came back from the dead". Well, we all make mistakes. But some are more significant, illuminating, and consequential than others, and thus worth revisiting. Johann Koehler (at The Reality-Based Community) offers this thought-provoking Quote of the Day. —Jeff Weintraub

Five years ago today, Lehman Brothers filed for bankruptcy. In contemplation of what followed, today’s Quote of the Day comes from a speech delivered a little over five years earlier:

Macroeconomics was born as a distinct field in the 1940’s, as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for many decades. There remain important gains in welfare from better fiscal policies, but I argue that these are gains from providing people with better incentives to work and to save, not from better fine-tuning of spending flows. Taking U.S. performance over the past 50 years as a benchmark, the potential for welfare gains from better long-run, supply-side policies exceeds by far the potential from further improvements in short-run demand management.

About Me

Jeff Weintraub is a social & political theorist, political sociologist, and democratic socialist who has been teaching most recently at the University of Pennsylvania, Bryn Mawr College, and the New School for Social Research, He was a Visiting Scholar at the Center for European Studies at Harvard University in 2015-2016 and a Research Associate at the Graduate School of Social Work and Social Research, Bryn Mawr College.
(Also an Affiliated Professor with the University of Haifa in Israel & an opponent of academic blacklists.)